If Greenhouse Gases Caused The Flood, Who's On The Hook For The Damage? And Who Decides?

Arctic ice formed a natural sea wall that protected the barrier-reef of Kivalina, home to about 400 Inupiat Eskimos — until it thinned in recent years, and waves gulped at the shore, eroding the spit of land off Alaska's northwestern shoreand compelling residents to look elsewhere to live.

The suit so far has been unsuccessful. Where it has succeeded, however, is in giving insurance lawyers a case study of an issue emerging as a major concern to property-casualty insurance companies and reinsurers, such as those in Hartford and Fairfield counties. Energy companies, air polluters and all manner of potentially responsible parties could be sued, and if they are, their liability insurer has an obligation to defend them.

Insurers in the property-casualty business already pay tens of billions of dollars annually to fix homes and businesses damaged by hurricanes, tornadoes and other natural disasters around the world. Those are property-claim payments. Liability cases, such as the Kivalina suit, could present a one-two punch for the property-casualty industry: costly property claims, and costly legal expenses to defend clients sued by groups looking to cash in on liability coverage.

U.S. courts saw a rise in the number of climate-change-related lawsuits in the past decade, including some brought by flood-damaged towns alleging that energy companies are responsible for churning out emissions that contribute to global warming and, therefore, are partly responsible for a range of damaging weather, said Michael Gerrard, director of the Center for Climate Change Law at Columbia University.

"This litigation really began in the 2000s," he said.

Gerrard has tallied 527 climate-related lawsuits filed between 1989 and Oct. 3, 2012, when he last updated the total.

The Kivalina case, filed in 2008, is considered a touchstone for lawsuits claiming global warming is the cause of damage related to everything from rising sea levels to rampant wildfires to brutal hurricanes.

The Inupiat sued Exxon Mobil Corp. and other companies that, they say, are ultimately responsible for their predicament. Moving their entire village would cost anywhere from $95 million to $400 million, as estimated by the U.S. Army Corps of Engineers and the Government Accountability Office.

But as recently as Sept. 21, the 9th Circuit Court of Appeals upheld a U.S. District Court ruling that Kivalina had no standing to sue air-polluting energy companies and couldn't link the erosion to the defendants.

"By Kivalina's own factual allegations, global warming has been occurring for hundreds of years and is the result of a vast multitude of emitters worldwide whose emissions mix quickly, stay in the atmosphere for centuries, and, as a result, are undifferentiated in the global atmosphere," Judge Sidney R. Thomas wrote in the court's opinion. "Kivalina nevertheless seeks to hold these particular appellees, out of all the greenhouse gas emitters who ever have emitted greenhouse gases over hundreds of years, liable for their injuries."

But lawyers say that decision, and others like it, hardly put the matter to rest. And regardless of the ultimate legal outcome, insurance companies are on the hook to defend their clients in court — it's part of a contractual "duty to defend" under liability coverage. So, even if these lawsuits all fail, insurers could face mounting legal expenses to defend clients, or to defend themselves from paying damages if the insurer believes global warming is outside what's covered by a liability policy.

Is Global Warming Covered?

Some insurers, such as Munich Reinsurance and The Hartford Financial Services Group, have taken a vocal public stance affirming that climate change is a real and growing concern. Insurance companies and reinsurers, which provide property coverage to insurers, have paid out between $10.4 billion and $110.8 billion annually to cover natural disasters worldwide between 2000 and 2009, according to the Insurance Information Institute, a trade group.

Lawsuits filed to cash in on liability coverage would be on top of property-damage expenses the industry already pays. Global warming is an emerging liability risk for insurers.

"I think we can all agree that, at least, there's a very significant risk that climate change is going to impact our society," said William F. Stewart, an attorney based in Blue Bell, Pa., who said he has practiced insurance law for about 20 years.

"You cannot have 7 billion people on the planet, built around certain ecosystems, and then potentially throw them into some form of disarray, and not have all sorts of things happening that are not desirable," Stewart said. "I think we can also agree that, in our society, it's the insurance industry that is, at least, among the primary institutions that respond to those sorts of risks."